As a follow up to this piece we wanted our readers to know that we have started reading Michael J. Mauboussin's "More Than You Know" and are enjoying it thoroughly. For those interested in the book you can read some of Maouboussin's research pieces on the Legg Mason Capital Management web site.

The most recent piece, "Long Term Investing in a Short-Term World" (pdf) discusses the opportunities that arise for investors with a longer term time horizon. Maouboussin believes that with the increasingly short term nature of the investment business and corporate managements there arises a "time arbitrage" where patient investors can seek our situations where fair value has diverged from the current price.

We recommend the entire piece, but provide a brief excerpt to whet your appetite:

Asset prices reflect a set of expectations. If investors chasing noise create a set of expectations inconsistent with the long-term signal, an opportunity for time arbitrage arises. This arbitrage works only if the short-term focus creates a diversity breakdown—too few investors focused on the signal—and the signal becomes clear over time. So the critical considerations in navigating the investing world distill to psychology, incentives, and expectations. Intelligent investors remain highly aware of all three, and use them for the advantage of their fund holders.

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